By AARON KATSMANA man counts New Israeli Shekels.(photo credit: REUTERS)
Joshua: Shall we play a game?David: Oh!Jennifer: I think it missed him.David: Yeah. Weird isn’t it? Love to. How about Global Thermonuclear War.Joshua: Wouldn’t you prefer a good game of chess? David: Later. Let’s play Global Thermonuclear War.Joshua: Fine.– From the movie War Games (1983) As the saber rattling between N. Korea and the United States appears to get more serious, investors and markets around the world are getting jittery. As the North Koreans continue to make threats about turning the US into a nuclear theater it’s US President Donald Trump’s response which triggered skittishness on Wall Street.“North Korea best not make any more threats to the US. They will be met with fire and fury like the world has never seen,” Trump said.I have received many calls of late from nervous investors looking to sell large portions of their stock portfolio’s due to worry over potential war. They want to know what I think they should do.Stock up on water?Anyone who reads my column or has listened to my podcast can probably anticipate my advice. Correct! I generally advise my clients to do nothing. It’s important to stay calm and stick to the investment plan that you have created. As I have written many times, “the world has always been a very dangerous place; pundits have always been calling for market crashes, and most of the time the market moves higher.”I can’t tell you how many times over the years that I have had clients try and get out in front of all kinds of geopolitical events to try and make a lot of money. They try and anticipate how the events will play out and how they can profit as a result. More than once the client was correct in the actual prediction, but ended up losing money anyway as the market reacted differently than they had bet.While these investors tried to time the market and be clever they lost money. And what happened eventually? The markets may have dropped a bit but in the end they moved higher. Investors who heeded my advice of staying the course are the ones who ended up profiting.Keep in mind that in the handful amount of times when the stock market actually crashed it happened without much warning and was not usually telegraphed.Can you afford to lose? I know that I may sound like a broken record but anyone who is investing in stocks has to have a long-term investment horizon, be able to lose money, and understand that markets regularly drop. Too often I am approached by individuals who plan to buy an apartment in 1-2 years and want to invest all their down payment money in the stock market because they are “making no money leaving the money in the bank.” If you can’t afford to lose it; don’t invest it! A 10% drop is a regular occurrence, and happens on average annually. While no one likes to lose money, market drops actually serve a good purpose. It’s like a slap in the face or reality check for investors. It helps them get back on track and allocate money in line with goals and needs. Investors get spoiled when markets go up and up without so much as even 5-6% downside. As they make more and more money they tend to become more aggressive.It is certainly a great feeling hitting refresh on your computer and seeing that you just made another $5,000.Problem is that as you make more, your portfolio automatically gets out of your chosen allocation. And when things start to fall, you end up losing even more money because your portfolio has become too aggressive.Take advantage If you are scared, use the saber rattling as the impetus to review your goals and needs both short and long-term and then see if your portfolio is properly allocated to enable you to achieve what you are trying to accomplish.If it is out of whack, make the necessary changes. Remember that markets go up and down and the way to build wealth is by staying patient with the money that you can afford to lose.The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the US and Israel, and helps people who open investment accounts in the US. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net).Member FINRA, SIPC, MSRB, SIFMA. For more information, call (02) 624-0995 visit www.gpsinvestor.com or email aaron@lighthousecapital.co.il.
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